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The number of people filing for initial unemployment claims reached a new pandemic low of 553,000 in the third week of April, a fraction of the 3.5 million tally a year ago.
And the S&P 500, which historically has posted average annual gains of about 10%, is up more than 12% in just four months.
All this good news is inflating talk of a potential bubble in the stock market.
May historically is one of just three months when the S&P 500 declines, on average, though it does so just barely.
The National Bureau of Economic Research has not yet called an end to the recession that began in 2020, but earnings season is telling us that the worst of the economic downturn is over.
The question heading into May is whether this trend can continue for the rest of the sectors that haven’t reported yet, according to Ryan Kelley, chief investment officer and portfolio manager of Hennessy Funds.
As for economic data in the month ahead, investors remain focused on inflation—and after months of fretting, the first signs of a real uptick in inflation have arrived.
“Everyone’s been focused on the extent to which inflation is going to kick in,” notes Greg Bassuk, the chief executive officer of AXS Investments.
“We still think this market has more to run because there will be a good amount of time, a couple years even, before the Fed is raising rates significantly,” says Kelly.
President Joe Biden caused a minor stir in the stock market last month when the details of his Made in America plan were released.
Wall Street will monitor developments on possible tax hikes closely because of the potential impact on stock prices, Bassuk says.
After decades of generally falling interest rates—and more than 30 years of rising bond prices—investors are trying to sort out what the era change means.
Another interesting development? Volatility has carried over to other markets, like cryptocurrencies, in addition to the traditional assets of stocks and bonds, Bassuk notes.
And Kelley expects this trend to continue as investors come back to the sectors and stocks that “were completely forgotten” in the beginning of the stock market’s rally last year.
Ben is the Retirement and Investing Editor for Forbes Advisor.